How can landlords protect against rent arrears and legal expenses?

Despite rigorous tenant checks and references, tenants defaulting on rent or other breaches of the tenancy agreement can be a risk for landlords. 

Evicting tenants can be costly and recuperating lost rent can also be expensive. Rentguard, the NRLA’s Legal Expenses and Rent Guarantee Insurance partner, has explained why suitable insurance for such risks can be important, including what it can cover and what happens if you need to make a claim.  

Please note that the following information is for guidance purposes only and is not a substitute for policy documentation, which you should read carefully and in full. Cover is subject to the full terms, conditions, limits and exclusions of Rentguard’s Legal Expenses and Rent Guarantee Protection insurance policy wording. 

According to the latest English Private Landlord Survey from Gov.uk, landlords reported rent arrears as the most common reason (46%) for ending a tenancy.

Source

When a tenant struggles to meet their monthly rent, do you have a backup for paying your mortgage and other costs? As well as the financial impact of rent arrears, if you are forced to issue court proceedings against your tenant, you could incur substantial legal fees.  

Legal Expenses and Rent Guarantee Insurance can provide cover designed to help protect landlords from the financial losses that can occur as a result of tenants failing to pay their rent. This insurance can typically cover rent arrears and legal costs associated with the eviction of a tenant who has not paid their rent.    

With Rentguard’s Legal Expenses and Rent Guarantee Insurance, NRLA landlords can benefit from the following: 

• Financial protection against unpaid rent - to help provide landlords with a financial backup if a tenant is unable to pay their rent. 

• Cover for the cost of legal advice and representation - to help landlords follow the correct procedures when evicting a tenant. 

• Cover for the cost of eviction proceedings - to help landlords through the process of evicting a tenant due to rent arrears. 

• A mediation service during the claims process - assistance from a third party to help landlords and tenants reach an agreement. 

Policy limits and exclusions may apply. Please see policy wording for full terms and conditions. 

Referencing is a requirement of Rentguard’s Legal Expenses and Rent Guarantee Insurance policy. You can read more about the tenant and credit check services available to NRLA members here. 

Mediation is an alternative dispute resolution (ADR) that gives landlords and tenants the opportunity to resolve issues without going through the courts. This process can be useful for rent arrear disagreements between landlords and tenants. The purpose of mediation is to help the two parties find a mutually agreeable solution overseen by an independent mediator.  

Mediation involves an impartial person, trained to deal with difficult discussions, who acts like a referee in a meeting between the two sides in an attempt to find a way to resolve the problem. A mediator will not make a decision, nor will they enforce any resolutions or pathways. What they will do is guide the parties to find an outcome that will be entirely decided by the landlord and tenant.  

Tenant referencing is an in-depth overview of prospective tenants and any guarantors. It can help you select reliable and financially stable tenants and guarantors. Referencing is also a requirement of Rentguard’s Legal Expenses and Rent Guarantee Insurance. 

An affordability check is one important aspect of tenant referencing, in which a tenant needs to prove they can afford to pay the rent. Landlords may find it more difficult to take out Legal Expenses and Rent Guarantee Insurance if the tenant fails an affordability check. If a tenant does not meet the minimum standards of an affordability check, they may be asked to put up a guarantor. 

Other conditions of a Legal Expenses and Rent Guarantee Insurance policy can include having: 

• A suitable tenancy agreement in place 

• The tenant's deposit secured under one of the government's approved tenancy deposit schemes 

• All required licences for the property 

If you fail to comply with any legal or landlord compliance, any claims made may be invalid. 

You can take every step to make your buy-to-let investment successful, but despite your best efforts, some situations are unpredictable. Legal Expenses and Rent Guarantee Insurance can help to provide peace of mind that if issues out of your control occur, such as a tenant failing to pay rent and remaining in the property, you have insurance in place. 

Or speak to our specialist team on 0333 000 0169. 

The sole purpose of this article is to provide information on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Rentguard and National Residential Landlords Association, an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein. 

National Residential Landlords Association is an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. Rentguard is a trading name of Arthur J. Gallagher Insurance Brokers Limited.